RERA Allows Homebuyer To Withdraw From Project Due To Delayed Possession

RERA Allows Homebuyer To Withdraw From Project Due To Delayed Possession

Cites the decision of the Supreme Court in a previous case

The Karnataka bench of the Real Estate Regulatory Authority (RERA) has granted a homebuyer the right to withdraw from the real estate project in a matter of delayed possession of several years.

The bench comprising Justice Neelmani N Raju directed the builder to refund the entire amount deposited, with interest, to the homebuyers.

On 14 June 2017, the homebuyer (complainant) entered an agreement with the builder (respondent) to purchase a flat costing Rs.11,605,863. The payment was made through various transactions.

According to the agreement, the builder promised to deliver possession of the flat by June 2020, with a grace period extending to December 2020.

Meanwhile, a tripartite agreement was signed between the homebuyer, the builder, and Indiabulls Housing Finance Limited (IHFL) for a home loan. The agreement’s Clause 17 stipulates that in the event of flat cancellation, the builder is obligated to refund the total amount due to the lender.

On 14 July 2017, the homebuyer executed a buyback agreement, guaranteeing profits upon expiry. Thus, the builder was bound to pay a committed profit of Rs.4,120,354 if the homebuyer invoked the buyback option.

However, despite the homebuyer's 18 December 2019 email notification, intending to invoke the buyback option, the builder failed to execute the cancellation of the sale agreement.

He refused to refund the initial payment along with the committed profit value and failed to provide possession of the flat within the agreed timeframe.

As a result, the homebuyer filed a complaint with Karnataka RERA seeking withdrawal and a refund of Rs.1,74,87,461 with interest.

The builder attributed the delay in the possession of the flat due to the Covid-19 pandemic, which inflicted financial strain on various sectors, including real estate. He argued that the homebuyer's plea for withdrawal from the project and compensation (as specified in the agreement), lacked substance.

The builder stated that the homebuyer's request for delay compensation, with interest, was improper and ambiguous. He submitted that the relief sought comprised disparate statements rather than a coherent argument for a refund and compensation for the delay.

However, the tribunal held the builder in contravention of the Real Estate Regulation and Development Act, 2016 for failure to deliver timely possession. It thus granted the homebuyer the right to withdraw and demand a refund with interest under Section 18(1) of the Act.

The RERA referred to Section 18 of the Act, which reads:

Return of amount and compensation

1) If the promoter fails to complete or is unable to give possession of an apartment, plot or building -

(a) in accordance with the terms of the agreement for sale or duly completed by the date specified therein; or

(b) due to discontinuance of his business as a developer on account of suspension or revocation of the registration under the Act or for any other reason.

2) He shall be liable on demand to the allottees, in case the allottee wishes to withdraw from the project, without prejudice to any other remedy available, to return the amount received by him in respect of that apartment, plot, building with interest at such rate as may be prescribed, including compensation, as provided under the Act.

3) Provided that, where an allottee does not intend to withdraw from the project, he shall be paid by the promoter, interest for every month of delay, till the handing over of the possession, at such rate as may be prescribed.

The regulatory authority held that in case the homebuyer desired to withdraw from the project, the builder was liable to return the amount.

The bench cited the judgment of the Supreme Court in the Newtech Promoters and Developers Pvt. Ltd vs. State of Uttar Pradesh & Ors case. Therein, it was held that if a builder failed to deliver possession of the apartment, plot, or building within the stipulated timeframe under the agreement terms, the homebuyer's right to seek a refund and claim interest for the delay was unconditional and absolute, regardless of unforeseen events or stay orders of the courts.

Thus, the judge ordered the builder to refund Rs.1,74,87,461 with 9 percent interest to the complainant within 60 days.